Private health insurance companies are dumping about 25,000 retirees and others with federal Medicare coverage in Oregon next year, forcing them to hunt for alternative coverage.

Companies across the country are leaving the market as a result of a federal law passed in 2008, which requires so-called private fee-for-service plans to meet the same requirements as HMOs and preferred-provider organizations, or PPOs, serving Medicare enrollees. Everyone affected in Oregon will have the option of enrolling in another private health plan, but monthly costs may be substantially higher and choices limited for those in rural counties, according to Oregon's Senior Health Insurance Benefits Assistance program.

In Malheur County, for example, seniors on Medicare this year could choose from 16 health plans offered by six companies, with premiums ranging from zero to an average of $84 a month (in addition to the regular Medicare Part B premium). Next year, options narrow to one company, ODS Health Plans, offering two benfit designs: a PPO plan costing $127 a month with drug coverage, or $64 without drug coverage.

"All will have at least one other option, but for many folks, it may not be an affordable option," said Lisa Emerson, manager of the state's Senior Health Insurance Benefits Assistance program.

Alternatives include relying on basic Medicare coverage and buying a stand-alone prescription drug plan, available for about $30 a month. Emerson said counseling is available through the Oregon SHIBA program.

Help sorting Medicare options

Call Oregon SHIBA to talk to an expert or set up a one-on-one appointment: 1-800-722-4134

More than 612,000 Oregonians are eligible for Medicare, the federal health-care program for citizens age 65 and older. About 200,000 of them have coverage through Medicare Advantage, in which the federal government pays a private health plan to administer benefits.

In the Portland area, Humana continues to offer private fee-for-service plans in 2011, and seniors have 18 Medicare Advantage plans to choose from, including three zero premium options. Premiums average $36 a month for plans with drug coverage.

Until now, private fee-for-service plans weren't required to establish networks of doctors who agree to care for the plan's Medicare enrollees, unlike HMO and PPO plans participating in the Medicare Advantage program. As a result, some seniors in private fee-for-service plans have struggled to find doctors who would accept their coverage. Some fee-for-service plans also came under federal scrutiny for aggressive marketing tactics.

In 2008, Congress passed a law, the Medicare Improvements for Patients and Providers Act, which clamped down on misleading marketing and required fee-for-service plans to establish provider networks starting in 2011. Rather than invest in developing provider networks, some insurers started withdrawing from the market last year, as predicted by health services researchers.

With the latest wave of companies dropping out of Medicare Advantage, opponents of the Obama administration have tried to place blame with the recently enacted federal health reform law. "Seniors face fewer choices, fewer benefits and higher costs because of the partisan health care overhaul and previous changes to the Medicare program under Democratic leadership," Sen. Charles Grassley (R-Iowa), said in a statement this week.

In contrast, the Centers for Medicare & Medicaid Services said average Medicare Advantage premiums will be 1 percent lower next year, that enrollment will increase 5 percent, and that people in Medicare Advantage plans and original Medicare will gain access to preventive benefits with no out of pocket costs.